BACHELOR OF MANAGEMENT WITH HONOURS (BIM)

JANUARY / 2021

BBAW2103

FINANCIAL ACCOUNTING

CONTENT

Assignment 1 (CLO 1) 3-4

ASSIGNMENT 2 : CLO 2 5
 PART : A
PART : B 6
Question 2 (A) 7
Question 2 (B) 8
Question 2 (C) 9

Assignment 1 (CLO 1)

"The main purpose of the financial statements is to educate the shareholders about the financial
status and financial performance of their company. This is because the shareholders are the real
owners of the company but the company is governed and administered by directors. As directors

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act as stewards of shareholders, it is their duty to prepare financial statements that are free from
material misstatements as well as also possess some qualitative characteristics which are
important to enhance their quality and relevance. Following are the main qualitative
characteristics of financial statements:
Understandability
Relevance
Reliability
Comparability
Timeliness

a) Understandability
The financial statements are published to address the shareholders of the company. So it is
important that these statements must be prepared in such a way that is easy to understand and
interpret for the shareholders. The information provided in these statements must be clear and
legible. For the sake of understandability, the management must consider not only the statutory
data and information but also the voluntary information disclosures which would make financial
statements easier to understand. The directors must elaborate the information provided in the
statements where necessary.Requires financial information to be understandable or
comprehensible."

b) Relevance
The information provided in the financial statements must be relevant to the needs of its users.
Although the main statutory recipients of these statements are ‘shareholders’, but there are many
other stakeholders that rely on these statements during their decision making process.For
example Fund Providing Institutions such as (Banks, Insurance Companies, Assets Funding
Firms), potential investors (for making investments in prospective companies), suppliers (for the
assessment of credit rating).So the information provided in these financial statements must be
relevant to the ‘information needs’ of all these stakeholders, which able to affect their economic
decisions."

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c) Reliability
The information provided in the financial statements must be reliable and true. The information
extracted to prepare these financial statements must be from reliable and trustworthy sources.
The financial statements must depict the true and fair picture of the status of the company affairs.
This means that the information provided must not have any significant errors or material
misstatements. The transactions shown in the statement must be based on the concepts of
prudence and must represent the true nature of company’s transactions and operations. The areas
that are judgmental and subjective in nature must be presented with due care and keen
competence."

d) Comparability
The financial statements must be prepared in such a way that they are comparable with prior year
financial statements. This characteristic of financial statements is very important to maintain, as
it makes sure that the performance of the company could be monitored and compared. This
characteristic is maintained by adopting accounting policies and standards that are applied are
consistent from period to period and between different jurisdictions. This enables the users of the
financial statements to identify and plot trends and patterns in the data provided, which makes
their decision making easier and faster. Comparable information enables comparisons within the
entity and across the entities."

e) Timeliness
All the information in the financial statements must be provided within a relevant span of time.
The disclosures must not be excessively late or delayed so that while making their economic
decisions the users of these statements posses all the relevant and up-to-date knowledge.
Although this characteristic may take more resources but still it is a vital characteristic as
delayed information makes any corrective reactions irrelevant.This means providing information
to decision makers in time to be capable of influencing their decision."

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ASSIGNMENT 2 : CLO 2
Part A

DATE DESCRIPTION DEBIT(DT) CREDIT (CT)

DEC 1 2020 CASH 50,000.00  
  OFFICE EQUIPMENT 12,000.00  
  CAPITAL   62,000.00
  MOTOR VEHICLES 112,000.00  
  CASH   12,000.00
  NOTES PAYABLE   100,000.00
  CASH 3,000.00  
  ACCOUNT RECEIVABLE 4,000.00  
  LEGAL FEE SERVICE   7,000.00
  UPKEEP OF OFFICE 2,000.00  
  CASH   2,000.00
  ADVERTISING 700.00  
  CASH   700.00
  ACCOUNT RECEIVABLE 5,000.00  
  SERVICE   5,000.00
  CASH 3,000.00  
  ACCOUNT RECEIVABLE   3,000.00
  SALARY 3,600.00  
  CASH   3,600.00
  OFFICE RENTAL 3,400.00  
  CASH   3,400.00
  OFFICE EXPENSES 400.00  
  OFFICE SUPPLIES   400.00

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 Asset = Equity + Liability
office Accounts
Transaction office Accounts Unearned
Cash equipmen Receivable Capital
supplies Payables Revenue
t s

1 50,000.00 12,000.00 0.00 0.00 = 62,000.00 0.00

balance 50,000.00 12,000.00 0.00 0.00 62,000.00 0.00
2 - = -12,000.00
12,000.00
balance 38,000.00 12,000.00 0.00 0.00 50,000.00 0.00
3 3,000.00 4,000.00 = 7,000.00
balance 41,000.00 12,000.00 4,000.00 0.00 57,000.00 0.00
4 -2,000.00 2,000.00 =
balance 39,000.00 12,000.00 4,000.00 2,000.00 57,000.00 0.00
5 -700.00 = -700.00
balance 38,300.00 12,000.00 4,000.00 2,000.00 56,300.00 0.00
6 5,000.00 = 5,000.00
balance 38,300.00 12,000.00 9,000.00 2,000.00 61,300.00 0.00
7 3,000.00 = 3,000.00
balance 41,300.00 12,000.00 9,000.00 2,000.00 61,300.00 0.00 3,000.00
8 -3,600.00 = -3,600.00
balance 37,700.00 12,000.00 9,000.00 2,000.00 57,700.00 0.00 3,000.00
9 -2,400.00 = -2,400.00
balance 35,300.00 12,000.00 9,000.00 2,000.00 55,300.00 0.00 3,000.00
10 -400.00 = -400.00
BALANCE 35,300.00 12,000.00 9,000.00 1,600.00 54,900.00 0.00 3,000.00
PART B

Question 2 (A)

AFIF ENT
TRIAL BALANCE AS AT 31 DEC 2020

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 Unadjusted TB Adjustments Adjusted TB
Accounts
Debit Credit Debit Credit Debit Credit
Cash 18,500.00       18,500.00  
Accounts receivable 15,200.00       15,200.00  
Prepaid insurance 2,400.00     1,200.00 1,200.00  
Inventory at
31/12/2020 22,800.00       22,800.00  
Office supplies 4,500.00     2,000.00 2,500.00  
Prepaid advertising 3,400.00     3,100.00 300.00  
Furniture & fittings 22,600.00       22,600.00  
Accumulated
Depreciation –
furniture & fittings   10,400.00   2,260.00   12,660.00
Unearned Sales revenue   3,700.00   3,700.00   7,400.00
Accounts payable   17,500.00       17,500.00
Long term loan   12,000.00       12,000.00
Capital - Afif   24,000.00       24,000.00
Sales revenue   42,000.00 3,700.00     38,300.00
Salaries expenses 5,800.00   3,300.00   9,100.00  
Rental expenses 13,200.00   2,200.00   15,400.00  
Utilities expenses 1,200.00   350.00   1,550.00  
Depreciation - furniture
& fittings     2,260.00   2,260.00  
Office supplies
expenses     2,000.00   2,000.00  
Accrued Rental       2,200.00   2,200.00

Accrued Salary       3,300.00   3,300.00

Accrued Utility       350.00   350.00

Advertising expenses     3,100.00   3,100.00  

Interest expense     900.00   900.00  

Accrued Interest       900.00   900.00
Insurance Expenses     1,200.00   1,200.00  
109,600.0 109,600.0 19,010.0 19,010.0 118,610.0 118,610.0
Total 0 0 0 0 0 0

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Question 2 (B)

AFIF ENT
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DEC 2020

DESCRIPTION RM RM
Revenue     38,300.00
       
Expenses:      
Salaries expenses   9,100.00  
Rental expenses   15,400.00  
Utilities expenses   1,550.00  
Depreciation - furniture & fittings   2,260.00  
Office supplies expenses   2,000.00  
Insurance Expenses   1,200.00  
Advertising expenses   3,100.00  
Interest expense   900.00 35,510.00
Net Profit     2,790.00

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Question 2 (C)

AFIF ENT
BALANCE SHEET AS AT 31 DECEMBER 2020

DESCRIPTION RM RM RM
Book
Fixed Assets   Cost Acc Dep Value
Furniture & Fittings   22,600.00 12,660.00 9,940.00
         
Current Assets        
Cash   18,500.00    
Accounts receivable   15,200.00    
Prepaid insurance   1,200.00    
Inventory at 31/12/2020   22,800.00    
Office supplies   2,500.00    
Prepaid advertising   300.00   60,500.00
       
Less:        
Current Liabilities        
Unearned Sales revenue   7,400.00    
Accounts payable   17,500.00    
Accrued Rental   2,200.00    
Accrued Salary   3,300.00    
Accrued Utility   350.00    
Accrued Interest   900.00   31,650.00
         
Working Capital       102,090.00
Net Assets       38,790.00
         
Finance by:      
Less:Capital   24,000.00    
Add:Net Profit   2,790.00    

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Non - Current Liability        
Long term loan   12,000.00    
         
Total Liabilities&Owner
Equity       38,790.00

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